Medicare Advantage (sometimes called Medicare Part C or MA) is a type of health insurance plan in the United States that provides Medicare benefits through a private-sector health insurer. In a Medicare Advantage plan, a Medicare beneficiary pays a monthly premium to a private insurance company and receives coverage for inpatient hospital ("Part A") and outpatient ("Part B") services. Typically, the plan also includes prescription drug ("Part D") coverage. Many plans also offer additional benefits, such as dental coverage or gym memberships. By contrast, under so-called "Original Medicare", a Medicare beneficiary pays a monthly premium to the federal government and receives coverage for Part A and Part B services, but must purchase other coverage (e.g., for prescription drugs) separately.Most such plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Public Medicare Part C plans, including Medicare Advantage plans, finance at a minimum the same medical services as "Original" Parts A and B Medicare finance via FFS. Public Part C plans, including Medicare Advantage plans, also typically finance additional services, including additional health services; in 2019 extensive non-medical services such as assistance for daily living (ADL) services were added by many plan sponsors. A public Part C Medicare Advantage beneficiary must first sign up for both Part A and Part B of Medicare in order to choose Part C.
From a beneficiary's point of view, there are several key differences between Original Medicare and Part C. For example, Medicare Advantage plans include an annual out of pocket (OOP) spending limit, critical financial protection against the costs of catastrophic illness or accident. That is, under Part C plans, there is a limit on how much a beneficiary will have to spend annually OOP. That amount is unlimited in Medicare Parts A and B, which can cause financial ruin and incentivizes almost everyone on just Parts A and B to make other financial protection arrangements, typically by adding some kind of private supplemental indemnity insurance (and even those policies often do not provide absolute 100% financial protection because they only cover what Parts A and B cover to the limits of Parts A and B).Original Medicare and Medicare Advantage also handle payments to healthcare providers differently. Under Original Medicare, the Medicare program reimburses healthcare providers with a fee for each service provided to a beneficiary. This fee is often calculated with a formula (for example, the prospective payment system for hospital services), and while providers can reject Medicare's reimbursement rates (and thus opt out of the Medicare program), they cannot bargain over the reimbursement rates. By contrast, most Medicare Advantage plans negotiate payment rates and form networks with healthcare providers, similar to how purely private health insurance plans operate. In turn, the Medicare program pays Medicare Advantage insurers a monthly fee per enrollee (capitation) to cover the cost of carrying their beneficiaries.Nearly all Medicare beneficiaries (99%) will have access to at least one public Part C health plan in 2020; the average beneficiary will have access to 39 plans per county. This number varies yearly as new sponsors apply to CMS and/or old ones drop out (a process that takes place between January and June of the preceding year).